Speculation killed the STEEM DOLLAR Utility

4년 전

Speculation is only really a bad thing when it comes at the expense of something good. Anyone who has been in the Crypto space longer than 5 minutes would see that there is speculation abound and a lot of “Hot Money” pumping and dumping all across the Crypto landscape.

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It’s probably not ideal, but on the plus side there are a lot of innovative projects that are now flush with cash because people are pouring money into speculative Crypro projects in the hope of backing “The next big thing”. While many of those investors will lose their money, on the coalface it means that project teams are flush with funds and able to pursue their stated innovation goals. This is good for True Crypto Enthusiasts.

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But when it comes to the STEEM DOLLAR, the recent speculation comes at the expense of something good. Despite what many people on this platform would claim, the STEEM DOLLAR was designed to be a peg to the US Dollar and provide stability. Here is a direct quote from the STEEM whitepaper :-

Merchants give users a way to quickly convert their cryptocurrency into tangible goods and services. Merchants need a currency pegged to their unit of account, normally dollars. Accepting a volatile currency introduces significant accounting overhead.

Merchants will accept any currency if it increases their sales. Having a large user base with a stable currency such as SBD lowers the barrier to entry for merchants. The presence of merchants improves the system by creating an off-ramp for users to exit the system without going to the trouble of using an exchange.

Please note the bolded parts. The intention here is clear. The STEEM DOLLAR is meant to be a stable currency so that merchants can adopt the platform and not be concerned about price volatility.

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*One of my personal favourites. I kept it on my office wall back when I worked 9-5 and managed a software development team

Now, don’t get me wrong, I am also an Author here on the STEEM platform and my post rewards are up significantly due to the recent price pump of the STEEM DOLLAR. As an Author I am happy with the price pump and you need to keep in mind that all the other Authors here who are justifying, explaining and promoting the STEEM DOLLAR pump have a vested interest in doing so.

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But the fact remains, the STEEM DOLLAR peg to the US Dollar is currently broken. It has become a Speculative Asset for whatever reason, therefore it’s real Utility as a stable cryptocurrency is gone. It is no longer attractive for Merchants to use and it is no longer attractive as a place to store Crypto wealth in a stable and safe place. So the speculative pump comes at the cost of this very important STEEM DOLLAR Utility.

Now before you come at me with your arguments to tear me down, answer me this simple question :-

What can STEEM DOLLARS do that STEEM can’t?

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The answer is NOTHING. If you want to speculate on something then buy STEEM because at least STEEM can be converted to STEEM POWER and give you influence and voting power on the platform. STEEM DOLLARs give you NOTHING that STEEM can’t give you. You want 3 second block times? Free transactions? Use STEEM. So why would anyone in their right mind buy STEEM DOLLARs at this current inflated (and unstable) price?

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So I come back to my original statement.

Speculation has killed the STEEM DOLLAR Utility.

It is NOT filling the role it was designed for.


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I think it has killed the unique utility, hard to argue with that - but the fact is the peg was always broken: when I joined, it was $1.70 and it took months to decline down to $1, settled around 90c and proceeded to flash crash into the mid 50s. It took another couple months to recover "stability" around $1, but there were always significant arbitrage and volatility opportunities.

I think the well being of authors should be the community's primary concern and I'm not too fazed about whether or not a vendor has to set up a bot to automatically set prices every 15m and offload their SBD at trex automatically (seriously if you can't manage that, you shouldn't be in e-business). Before the rally, only a select few were earning an income here; though the SBD rally hasn't done much to close the income gap between elite posters and your average blogger, at least your average blogger is now (more than) fairly compensated.

I'm extremely pleased the witnesses have shown the leadership and courage to do nothing on this issue. Taking a leaf from the BOJ and ECB playbooks and implementing negative interest rates would be akin to going full retard.

What amazes me, is that even with all of us dumping SBD, the external markets are just happily absorbing it -> there is substantial external demand for SBD. Like @Aggroed, I believe this phenomena should be left to market forces to decide, as IMO it is doing an incredible amount of good for the people who make the platform what it is. In fact, I'd go as far as to say the witnesses should intervene to the upside if SBD begins to approach $2.

Wealth and income equality is impossible, maintaining/raising the minimum wage is simple with negligible consequences. That's a thing of beauty right there.

PS - this is coming from someone who lost money accepting SBD deposits which were converted to USD via @SBBank. We made those losses back on a single update post advising of switch to USD denominated deposits.

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It is clear to me that the peg was loose and would fluctuate with sentiment. I just never expected this kind of extreme. Nobody has yet given any rational reason for the pump and you can call me old school if you like, but I prefer markets to be rational.

It's got nothing to do with income inequality. It's about designing software for a purpose and then that purpose being compromised. None of the existing users (including the witnesses) particularly care because they are lining their pockets in the process.

Meanwhile merchants are not coming on board and Facebook is moving in to compete. But hey, lets make some hay while the sun is shining! :)

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Nobody has yet given any rational reason for the pump and you can call me old school if you like, but I prefer markets to be rational.

Reason A: You will need SBD to conduct an SMT ICO - controlling a large portion of the SBD supply could be a very wise business decision (which has already paid off).

Reason B: Some smart cookie in Korea worked out that SBD is an incredibly easy coin to pump due to relatively limited supply and made a very ballzy, successful trade. This manipulation then created an impressive looking chart and people, seeing the massive rally out of the historic range -> correction, are now betting on more upside based purely on technicals.

It's got nothing to do with income inequality. It's about designing software for a purpose and then that purpose being compromised. None of the existing users (including the witnesses) particularly care because they are lining their pockets in the process.

We can't have a discussion about the rewards system without discussing remuneration. Any attempt to lower SBD would be a direct attack on content creator remuneration (from people who earn a fuck ton of money witnessing).

Re: Honoring the whitepaper: all human constructs are fallible and rewards distribution was broken - the few people making a wage were arguably not the best content creators. They are marking even more now, but at least everyone else is doing really well too. Average Steemians were struggling for months out here when SBD and STEEM were sub $1. If a broken SBD peg means content creators actually getting paid, then IMO it is clearly the lesser of too evils vs not honouring (an arguably flawed) whitepaper to the tee.

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What happens if the SBD returns to $1. All those content creators have been lured here and encouraged by a false economy? Do they then piss off? Are we going to be content to return to being paupers? Is a boom-bust scenario for authors here better than organic growth with a focus on content and community rather than profit? I'm just playing Devils Advocate here, but they are valid questions.

I was not aware that SBD was required to conduct an SMT ICO. That might be a valid reason for pumping the price. As for Reason 2, it is reliant on the Greater Fool Theory and I would even argue that such a scheme would only be perpetuated by a Bad Actor.

But anyway, I'm not saying it is all bad. I'm just saying it is irrational and is not all good either. There are a fair number of people in my comments who had no idea why or what purpose SBD has. Considering what has happened this last month who can blame them for the confusion!?

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I just want to address the idea that Facebook is moving in to compete. Facebook is a publicly traded company and has fiduciary duties to it's stock holders, Steem blockchain isn't and does not. With that being said, it should be obvious that even IF Facebook implements some sort of system to reward it's users for activity, the amount of rewards will be negligible for the vast majority of it's users. It'll be akin to Youtube on it's reward platform, and will only really reward the HUGE names in content creation. Add to that the extremely centralized nature of it's platform, AND the mass censorship of it's base, it won't be as enticing as true blockchain alternatives, like Steem.

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The average Joe doesn't care about crypto or decentralisation. Merchants care about reaching potential customers so they will go with whoever has the best "Network Effect". Facebook could implement a totally centralised crypto, may as well be "Funny Money" at this point and 99% of the world wouldn't care as long as they're getting paid. To them Blockchain and Decentralisation are just buzzwords.

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Its a saddening and angering thought. My belief is that the masses have been systematically dumbed down not to care. Shame

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Yet Facebook will still have the majority of users because people are zombies. Up to us to open their eyes to the Steem platform. In another note. I've been trolling twitter using #steem. Not random trolling, quality trolling. I am sure some new comers, even old, doesn't know that there is a blockchain with instant and free transactions.

  ·  4년 전

The way I understand it is that the SBD is supposed to be worth at least $1 of Steem. Not pegged to one dollar.

With the current price of Steem and Value of the Steem dollar, this is essentially still true.

Even in the wallet it says, "STEEM DOLLARS
Tokens worth about $1.00 of STEEM" nothing about a USD peg.

Not to mention the higher the value of the SBD the better it is for content creators. I don't get how anyone can complain about this. It's serving it's purpose. It is worth about $1 of Steem. The actual rate is about 0.85 SBD per 1 Steem. But it's very close.

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I agree that there is no issue - but your logic is fatally flawed - your argument only works if STEEM was pegged to one dollar.

SBD is currently worth about $8 worth of STEEM, not about $1 ...

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  ·  4년 전

Sorry I shouldn't smoke and think too much. :P Just realized how what I said was dumb.

But either way. I don't see how they can expect to keep a currency pegged to a dollar without centralizing the creation of it and by allowing it to be traded on external exchanges. If they didn't allow it to be traded somehow then perhaps the peg could've stuck. Otherwise the supply would have to be manipulated by someone.

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Yeah the problem is, unlike most coins ... SBD actually has intrinsic value - it is always worth at least $1 USD ... IMO some whale saw that flaw on the asset and the limited supply as an attractive investment!

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  ·  4년 전

Wow this received a lot of upvotes quick. Haha

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Did you read the whitepaper quote? The intention of the design is right there in black and white.

How about the part where I explain that Authors on the platform have a vested interest in promoting the SBD price pump?

Congrats on your upvotes. How about you throw me one? Perhaps journalistic integrity is not valued on this platform and I should only write about things that serve the vested interests.

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Know them feels dude. Keep up the good work.

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My upvote on your post isn't worth anything, but a healthy critique of any system is necessary and welcomed for the continued longevity of said system, so there. I'd hate to be labeled a FUDder on my first day using Steemit but you can search tether on medium or look at @bitfixed on twitter for a collection of articles and information on a couple of alarming problems with crypto that might have led to the price action that's been seen. In addition to huge levels of FOMO, in short, 7 of the top 10 exchanges use tether, the majority do not have true fiat pairing at all, USDT cannot even be used by US customers now because the creators of tether fear imminent US regulatory scrutiny (and have possibly already been targeted as canaries at one exchange have gone missing), and are speculated to be used in the pumping of various alt-coins and Bitcoin itself.

Not looking to hate on crypto itself or the technology, but I think that if the price were to crash then posts such as yours do a service to the community by reminding people what the original mission should be, and it was definitely not supposed to be any sort of scheme to get rich quick. Lasting change won't come from money changing hands rapidly enriching a few early adopters, it comes from long-term systemic changes in the way people view technologies, the impact of their uses and how they can participate in systems that are more beneficial to the whole instead of the few.

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  ·  4년 전

Thought I did upvote. Fixed.

But I don't see any mention of a USD peg in anything you quoted. It's still relatively stable as it's worth about $1 of Steem right now. A little more.

The only time it became unstable was when it jumped before the Steem price increased.

I really have no idea where the assumption of a USD peg comes from other than the fact it has a dollar sign in front of it. There is no mention of the USD anywhere.

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"Merchants need a currency pegged to their unit of account, normally dollars."

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OP seems to confuse 1 STEEM with $1 worth of STEEM ...

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  ·  4년 전

And to answer your question about what SBD does that Steem can't. It's infinite. It's the rewards distribution. Steem has a hard cap and SBD doesn't as far as I know.

That's about the only thing it does that Steem can't.

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SBDs are just steem wrapped in a smart contract that converts each SBD to one US dollar worth of steem when ever the conversion function is invoked.

Steem Dollars are Steem presented in a different package. So they are not infinite. Furthermore, if at any point the issuing of steem dollars gets to more than 10% of the total supply the blockchain will automatically stop the "printing" of SBDs.

Although, technically the Steem's supply is not hard capped. The inflation rate is set to decline over time but never stop. So you can say that the creation of steem is "infinite" but the creation of steem dollars depends on the market price of steem. The higher the price of steem the higher the print rate of steem dollars with a cap of 10% of the total supply in USD terms.

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  ·  4년 전

Interesting. I was curious as to how that worked.

So the amount of SBD created is correlated to the price of Steem then and supply of Steem then? Essentially SBD created will never exceed 10% of Steem market cap is what you're saying? What would happen to rewards if that scenario ever did occur?

And I thought the declining inflation basically does give Steem a hard cap no? I've seen a few places that list a max supply for Steem. Now I'm wondering where they get that number? Which is roughly 250 mil.

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Essentially SBD created will never exceed 10% of Steem market cap is what you're saying? What would happen to rewards if that scenario ever did occur?

That has happened before. The rewards are paid out in Steem instead of SBD.

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^ this is a good comment

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Thank you.

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  ·  4년 전

Steem Dollars also only have a circulating supply around 5 million right now while Steem has a supply of 250 million.

So Steem is way more valuable atleast in terms of market cap.

SBD, STEEM & BITCOIN has a equation, which determines value.

I was thinking about the this the other day and wondered why it hadn't addressed yet. Has @ned discussed this at any point? What can actually be done with out hurting the people invested in it?

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It's hard to say. Any action is likely to have winners and losers. Ideally the market just wises up and it corrects naturally. There are actually design mechanisms in place for the witnesses to add bias to dis-incentivise holding SBD but they wont use it because existing users are making too much money off it and they rely on those users for votes.

Welcome to the new world, same as the old world :)

Great article. SBD didn't seem to serve a purpose, therefore I didn't really understand the difference between Steem and SBD. You just convert the SBD to Steem so you can either sell it on an exchange or convert to Steem Power. I didn't realize there had been merchants that accepted SBD.

What do we do with SBD now?

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you find those who sell goods for it
there are a few small markets which accept it already

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which places does this - haven't seen any as of yet?

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Thanks. I don't think merchants are coming on board and nor will they. I once wrote about SBD being the ideal crypto for mainstream adoption HERE but none of that is really valid any more.

What to do with SBD? Sell it into this mania. Make your profit and put it in STEEM or another crypto IMHO.

Interesting read. What do you propose as the solution here though? The speculation is simply crazy right now...

~ Kevin

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you bring it down to 1$ and you remove the option to self vote

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The solution for the individual is to sell your SBD and buy STEEM or another crypto in my opinion.

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Yeah, that's what I was reading / have been doing now. Seems to make the most sense and be in line with the mission of the platform.

I'm new to platform and have been watching SBD with confusion based on the whitepaper. You make some clarifying points, hopefully there is a way to redeem SBD and retether to USD

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I'm quietly confident that once the mania subsides and investors realise there is no real benefit or utility left for the SBD then it will come back to earth. Might take years though.

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A crazy notion, but I suppose it is completely in line with the mania surrounding this super-bull market. Hard to know when to pull your toes out of the pool and praise jah for the profits you've been gifted...

The "How the customer explained it" comic is GOLDEN.
This is a really great post. Thank you!

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Thanks. I should really have explained that picture a bit. Probably only those with some knowledge of the software development process will actually get the joke :)

Interesting read, I never understood why there was SBD until I read this article. Would it have been possible to only allow the merchants to purchase SBD?

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No, I don't think so. How would the blockchain know who was a merchant and who wasn't. Too hard to do it that way.

So wats is tje best use now....bettrr to convert sbd to sp? Talking of votality wen i joined 3 month ago sbd was realing at 1$ and now it stands around 8$ the pump is there...would appreciate if the best use comes in

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buy stuff with it, don't hoard it like a stock

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The solution for the individual is to sell your SBD and buy STEEM or another crypto in my opinion.

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What your view in investing into steem power? And how does steem and steem power differ?

I am not gonna lie, I’d be sad to see 1sbd=14 usd go away, but I sell my art, so I understand where you are coming from😢

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Thank you. I think most people can only think from a position of self-interest, but you seem like one who can see the bigger picture :)

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I want to be part of the market, I’m a content creator but I also sell art. I want a stable sbd as promised. But maybe smt will take care of that? I can’t complain about the sbd pump, I’m divesifying my crypto wallet like mad and taking the profits to pump back into Steem while this last. If no one has taken the time to read the white paper, sbd is a debt backed currency. Everyone likes debt💀

Speculation has a huge impact on the crypto community in general. Remember Wraith Protocol and all the panic selling that happened after the 1st of the year...

All because of speculation as to the legitimacy of XVG.
You have a very sound point but it’s hard to tell what direction the SBD will truly go- let’s say in 5 years.

I didnt know why they (SBDs) were made until now. Having a crypto that is a stable price is for sure a benefit to merchants you dont have to keep changing prices on your listings all day because of volatile crypyo prices.

If the steem we made was given to us in liquid steem dollars instead of SP I would speculate on that instead. I get paid and the only thing I can cash out right away is the SBDs.

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It is definitely something to think about. If we got paid in liquid STEEM instead of SBD would things be better or worse in the long run?

Yeah as soon as some word of mouth sorry comes out about cryto, it only creates panic and then people start rushing to pull their money out and crash the markets but i do understand the fair, but its time for some of us to see that cryto is the new revolution and its not going away anytime soon it can only get better

As someone who enjoys the money crypto is making me, I still have to say I agree. There are some assets which I'm genuinely in because I want to be part of it and not just for the chance of making money. The fact that it's possible to earn money on here is a great bonus, but it's genuinely a platform I enjoy that offers me content like. Keep up the good work brother.

This post is everything, it opened my eyes sometimes I look at peoples transaction history and get to find out that they convert their sbd to Steem, I didn’t know steem was absolutely free of transaction fees and way more faster. Again about the speculation aspect of sbd it would really be great to bring it up as an issue if it could be fixed since it was meant to be pegged with the dollar. Atleast we have two means steemians could earn from which is the steem and SBD, there must be a reason the two coins where introduced.

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There is a reason it was designed with 2 coins. But it's not currently working as it was designed.

Couldn't agree more. Seems like @Dan predicted more witness engagement which didn't happen. Witnesses are supposed to update the interest rates in order sustain the peg but very few do so.

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Thanks. I think @dan is quite brilliant and the design of STEEM (and others) are very good, but in this instance the design has failed. As any software developer will tell you, human behaviour is harder to predict than code ;)

Reading this over, I had to read it twice, and it clicked in my brain.

I understand what your argument is in this post. But I don't have any value to offer besides that its nice to have all this $. Albeit a little $ at a time for me!

But really tho, thanks for the education here. I am investing a lot of time into this platform, as an content author, not so much a programmer or anything, and with having an innate desire to learn what I am doing, this is truly valuable info into on to what the purposes of SBD and STEEM are.

Cheers.

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Thanks for the compliment. I'm glad you got something out of my post.

Very interesting. I am new to steemit and appreciate your explanation. Seems simple that steem is the answer and it can do anything steem dollar does

Just yesterday as I was selling SBD to get STEEM, I was wondering about its purpose! thanks for the whitpaper quote and for the software development team graphic, the latter came in black and white when I had it on my wall, lol.

Thanks for sharing! A link to your post was included in the Steem.center wiki page about Steem Dollar (SBD). Thanks and good luck again!

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Wow. That is quite a big deal for me and a huge honour. Thank you :)

You mentioned some great stuff,,
I believe there a good use now for SBD, but in the near future we will see a big increase in SBD use,, we wont feel anything yet until the price touches $50 then it will be a new and fresh start for another record

i'm new here, how do i earn money lmao

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you don't write useless comments like ^these, and you pander whales

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Don't pander whales. We have enough suck holes in this place already. Create some good content that adds value and interest to the platform.

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as much as I want to agree with you, effort and good content are not rewarding nor motivating new members

I got 3SBD from a single vote of a whale for something funny I said in a topic of his, while all my topics hardly make 5 cents from dozens of votes

  ·  4년 전

thanks your ınformations

What is the main difference between how Steem Dollars is intented to work and how Tether is working - they are both supposed to be pegged to 1$, but they act quite different?

great advantage, thank you for providing this information, successful greeting to all of us

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i belive in steem and sbd they will fly fosho